Citigroup Boosting Anti-Money Laundering Efforts

Citigroup, one of the world's biggest banks, had major lapses in its anti-money laundering systems that are supposed to police the flow of shadowy money, a U.S. bank regulator said.

This function, where a bank acts as an agent of a foreign
bank to provide services, h as long been seen as a weak spot in
the U.S. banking system as smaller, foreign banks often seek
access to the U.S. financial system through this business.

A Senate investigative panel, which has identified numerous
ways in which illicit funds move globally, in 2001 issued a
report specifically targeting gaps in correspondent banking.

That report found that "U.S. banks, through the
correspondent accounts they provide to foreign banks, have
become conduits for dirty money flowing into the American
financial system."

In recent years regulators and law enforcement officials
have focused on money laundering problems at other large banks.

For instance, the U.S. unit of HSBC Holdings Plc,
ABN Amro Holding NV and Wachovia Corp all were fined or
reprimanded in 2010 by federal law-enforcement and bank
regulators for lapses in anti-money laundering systems.

In 2009 and 2010, Barclays Plc, Lloyds Banking
Group and Credit Suisse Group agreed to
settlements totaling more than $1 billion as part of a probe
into aiding sanctioned countries, banks or other enterprises.

The issue has also caught the attention of Congress.

A U.S. Senate panel is investigating HSBC and a hearing by
the Senate Permanent Subcommittee on Investigations could occur
later this year.

That investigation could extend to other banks or gaps in
the U.S. regulatory system, according to a person familiar with
the Senate probe. It is not known if Citigroup is a part of that
investigation. HSBC is cooperating with the probe.
(Reporting By Dave Clarke in Washington and Carrick Mollenkamp
in New York; Editing by Gerald E. McCormick, John Wallace and
Tim Dobbyn)